In perfect competition
A)the firm's demand curve is relatively elastic.
B)the firm's demand curve is relatively inelastic.
C)the firm's demand curve is perfectly elastic.
D)the firm's demand curve is perfectly inelastic.

Question

Quizplus · Accepted Answer

In perfect competition, there are many firms producing identical goods with no market power to influence the price. Therefore, the firm's demand curve is perfectly elastic, meaning the firm can sell as much output as it wants at the prevailing market price. The firm is a price taker and cannot increase the price of its product without losing all its customers. As a result, the firm's marginal revenue curve is equal to the market price, and it will choose the output level where its marginal cost equals the market price to maximize profits.

In Perfect Competition